Introduction

Access to quality healthcare remains a significant challenge in many parts of the world, particularly in developing nations like Zimbabwe. Traditional insurance models often exclude marginalized communities due to high costs, complex administrative processes, and a lack of trust. Procode aims to address these challenges by leveraging the power of blockchain technology and smart contracts to create transparent, accessible, and community-driven health insurance schemes. This article will delve into the mechanics of traditional insurance, explore how blockchain can revolutionize this model, and introduce Procode as a groundbreaking solution.

Understanding Traditional Insurance

Traditional health insurance operates on the principle of risk pooling. Individuals pay premiums into a shared fund, and when a member incurs medical expenses covered by the policy, they file a claim. The insurance company then uses the pooled premiums to pay for these claims. The viability of this model hinges on accurate risk assessment and premium calculation. Actuaries use statistical models and historical data to estimate the probability of various medical events occurring within a population. This allows them to set premiums at a level that covers expected claims and operating costs while ideally generating a profit for the insurer.

Challenges of Traditional Insurance in Developing Countries

Traditional insurance models often face several hurdles in developing countries:

1. High Administrative Costs: Setting up and maintaining a complex insurance infrastructure can be expensive, leading to higher premiums and reduced accessibility.
2. Lack of Trust: In some regions, there is a lack of trust in insurance companies due to past experiences of denied claims or opaque processes.
3. Exclusion of Informal Sector: Many individuals in developing countries work in the informal sector, making it difficult for them to access traditional insurance products designed for formal employment.
4. Limited Access to Healthcare Infrastructure: Even with insurance, access to quality healthcare facilities and personnel can be limited in some areas.

Blockchain and Smart Contracts: A Paradigm Shift

Blockchain technology offers a powerful solution to many of these challenges. A blockchain is a decentralized, immutable ledger that records transactions across a network of computers. This decentralization eliminates the need for a central authority, reducing administrative costs and increasing transparency. Smart contracts are self-executing contracts with the terms of the agreement directly written into lines of code. They automatically enforce the terms of the agreement when predefined conditions are met.

Implementing Community-Based Health Insurance (CBHI) on a Smart Contract

Procode utilizes the Polygon blockchain ecosystem to build CBHI schemes as smart contracts. Here’s how it works:

1. Community Formation: A group of individuals forms a community and defines the terms of their health insurance scheme, such as coverage limits, eligible medical services, and contribution amounts.
2. Smart Contract Deployment: These terms are encoded into a smart contract and deployed on the Polygon blockchain. This contract acts as the rulebook for the CBHI scheme.
3. Token Contributions: Members contribute to the scheme using USD-pegged stablecoins like USDT or USDC (ERC-20 tokens). These tokens are held in the smart contract’s escrow.
4. Claim Processing: When a member requires medical care, a verified practitioner or medical service provider submits a claim through the Procode platform. This claim is then reviewed and validated.
5. Automated Payouts: If the claim is valid, the smart contract automatically releases the appropriate amount of tokens to the member or directly to the healthcare provider.
6. Surplus Redistribution: At the end of the policy period, any remaining funds in the smart contract are automatically redistributed to the members proportionally based on the amount of contributions made and claims made by each member, ensuring a not-for-profit structure.

The Mathematics and Probability Behind CBHI Smart Contracts

While the smart contract automates the execution, actuarial science still plays a role in setting contribution levels. Here’s a simplified illustration:

• Expected Claim Frequency (λ): This represents the average number of claims a member is expected to make within a given period. This can be estimated using historical data or industry averages.
• Average Claim Cost (μ): This represents the average cost of a single claim.
• Expected Total Claims Cost (λ * μ): This is the product of the expected claim frequency and the average claim cost, giving the total expected claims cost for the community.
• Safety Loading: A small percentage is added to the expected total claims cost to account for unforeseen events and fluctuations in claim frequency or cost. This ensures the scheme has sufficient funds to cover unexpected claims.

Example:

Suppose a community has 100 members. Historical data suggests an expected claim frequency (λ) of 0.2 claims per member per year, and an average claim cost (μ) of $500.

• Expected Total Claims Cost = 100 members * 0.2 claims/member * $500/claim = $10,000
• Adding a 10% safety loading: $10,000 + ($10,000 * 0.10) = $11,000

Therefore, the total contributions required from the community would be $11,000, or $110 per member.

Blockchain Technology and ERC-20 Tokens

• Blockchain: As mentioned earlier, blockchain provides a transparent and secure ledger for all transactions within the CBHI scheme. Every contribution, claim, and payout is recorded on the blockchain, creating an auditable and tamper-proof record.
• ERC-20 Tokens: ERC-20 is a technical standard for creating tokens on the Ethereum blockchain (and compatible chains like Polygon). These tokens are fungible, meaning each token has the same value. Using USD-pegged stablecoins like USDT or USDC provides price stability within the CBHI scheme, protecting against the volatility of other cryptocurrencies.

Procode: A Multifaceted Platform

Procode goes beyond simply facilitating CBHI schemes. It offers several key features:

• Token Wallet: Users can securely store their USD tokens within the Procode wallet, enabling them to easily manage their contributions and receive payouts.
• Fiat On/Off Ramp: Procode provides a fiat on/off ramp, allowing users to easily convert their local currency into USD tokens and vice versa. This removes a significant barrier to entry for users unfamiliar with cryptocurrencies.
• Custodial Claim Management: Procode acts as a custodian for the CBHI contracts, ensuring that all claims are verified by qualified practitioners or medical service providers. This prevents fraudulent claims and maintains the integrity of the scheme.

Disruptive Potential of Procode

Procode has the potential to be truly disruptive in the healthcare landscape of Zimbabwe and beyond:

• Increased Accessibility: By lowering administrative costs and simplifying the insurance process, Procode makes healthcare coverage accessible to a wider population, including those in the informal sector.
• Enhanced Transparency: The use of blockchain technology ensures complete transparency in all transactions, building trust between community members and eliminating the opacity often associated with traditional insurance.
• Empowerment of Communities: Procode empowers communities to take control of their healthcare financing, creating sustainable and locally driven solutions.
• Reduced Fraud: The custodial claim management process and the immutability of the blockchain significantly reduce the risk of fraudulent claims.
• Efficiency: Automated processes within the smart contract streamline claim processing and payouts, improving efficiency and reducing delays.

Conclusion

Procode represents a significant step towards democratizing access to healthcare. By combining the power of blockchain technology, smart contracts, and community-based principles, Procode offers a transparent, accessible, and efficient alternative to traditional insurance models. This platform has the potential to transform healthcare financing in Zimbabwe and serve as a model for other developing nations seeking innovative solutions to healthcare access challenges.